Additional piece: The Future of Cryptocurrencies in the UK
The UK has seen a surge in cryptocurrency ownership in the past year, with almost one in 10 people surveyed by the Financial Conduct Authority (FCA) owning cryptocurrencies in 2022. However, the industry is still largely unregulated and often dubbed the ‘Wild West’ of finance. As a result, the FCA announced a new crackdown on improper selling in the industry, set to begin in October 2022.
In recent months, the UK has proposed a radical new regulatory regime for cryptocurrencies, which would align the rules governing the sector with those for traditional financial services. A cross-party group of MPs has criticized this policy, suggesting that they oversee cryptocurrencies instead of viewing them as a form of gambling. While the FCA’s new regulations may make it harder for people to buy cryptocurrency, the hope is that it will ultimately result in a safer and more reliable market for investors.
But what does the future hold for cryptocurrencies in the UK? Here are some potential scenarios:
1. Increased Regulation
As mentioned, the UK government is currently working to align regulations for cryptocurrencies with those for traditional financial services. This would require cryptocurrency firms to meet certain standards and be held accountable by the FCA. While regulation may initially dissuade some investors, it will ultimately create a more trustworthy market, making it more attractive to those who were previously wary of the volatile world of cryptocurrencies.
2. Integration with Traditional Banking
Cryptocurrencies have long been viewed as a separate entity from traditional banking, but this is slowly changing. Some banks have begun to accept cryptocurrencies and offer trading options to their customers. As cryptocurrencies become more regulated and mainstream, it is possible that they will become more integrated with traditional banking systems. This would make it easier and more convenient for people to invest in cryptocurrencies while still utilizing the services of their bank.
3. Popularity of Stablecoins
One of the main issues with cryptocurrencies is their volatility. However, stablecoins, which are pegged to a stable asset such as gold or the US dollar, offer a potential solution. These coins offer the benefits of cryptocurrencies while minimizing the risk of volatility. As the popularity of stablecoins grows, it is possible that they will become the preferred investment option for those seeking the benefits of cryptocurrencies without the risk.
4. The Rise of CBDCs
A central bank digital currency (CBDC) is a digital asset issued by a central bank that represents the country’s official currency. Many central banks are exploring the idea of CBDCs, as they offer potential benefits such as increased financial inclusion and decreased operating costs. While CBDCs would be regulated and backed by a central authority, they would also offer many of the same benefits as cryptocurrencies, such as near-instant transactions. As CBDCs become more prevalent, it is possible that they will become the dominant form of digital currency in the UK.
In conclusion, the future of cryptocurrencies in the UK is still uncertain. While increased regulation and integration with traditional banking may make the market more stable and reliable, the rise of stablecoins and CBDCs may lead to a shift away from traditional cryptocurrencies altogether. Regardless of the outcome, it is clear that digital currencies will continue to shape the future of finance in the UK and beyond.
Summary:
UK cryptocurrency ownership more than doubled last year, with almost one in 10 people surveyed by the FCA owning cryptocurrencies in 2022. The FCA is set to crack down on improper selling in the industry in October 2022. The UK government is working to align regulations for cryptocurrencies with those for traditional financial services, which would create a more trustworthy market but may initially discourage investors. Cryptocurrencies may become more integrated with traditional banking systems, and stablecoins and CBDCs offer potential solutions to issues with volatility. The future of cryptocurrencies in the UK is uncertain, but they are sure to continue shaping the finance industry.
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UK cryptocurrency ownership more than doubled last year, the Financial Conduct Authority said on Wednesday, announcing an October start date for cracking down on improper selling in an industry often dubbed the ‘Wild West’ of finance.
Nearly one in 10 people surveyed by the UK’s top financial regulator owned cryptocurrencies in 2022, more than double the year before, despite regulators warning that cryptocurrency investors should be prepared to lose the entire outlay.
“It is up to people to decide whether to buy cryptocurrencies. . . Our rules give people time and the right risk warnings to make an informed choice,” said Sheldon Mills, head of consumer and competition at FCA. He added that his crackdown on the crypto group’s advertising will begin in ‘October 8th.
Regulator update comes on a busy week for the cryptocurrency industry after two of its biggest exchanges, Binance and Coinbase, went down sued by the United States Securities and Exchange Commission for alleged securities law violations.
In recent months, the UK has proposed a radical new regulatory regime for cryptocurrencies in which the rules governing the sector will be more closely aligned with those for traditional financial services. A cross-party group of MPs recently criticized the policy, suggesting they oversee cryptocurrencies instead a form of gambling.
Some 36% of the 2,000 adults surveyed by the FCA said they have seen or heard ads for cryptocurrencies, while 25% of those who had not previously been involved in cryptocurrencies have become “curious” due to exposure to advertising campaigns.
FCA’s cryptomarketing scheme it will require companies to use risk warnings and offer a “24-hour cooling-off period” for customers. Incentives for customers to “refer a friend” will also be banned.
THE scheme will apply to all cryptocurrency businesses that market to UK customers, whether they are based in the UK or overseas. “The cryptocurrency industry needs to prepare now for this significant shift,” Mills said.
Harry Eddis, a lawyer at Linklaters, said the rules would have a “significant impact” on the UK market, making it harder for people to buy cryptocurrency.
The FCA currently regulates crypto firms for money laundering compliance only. His research found that 28 percent of those who don’t use cryptocurrencies would be “more likely” to buy them if the market and activity were regulated to a standard similar to that of traditional financial services.
The surge in cryptocurrency ownership has come despite a tumultuous time for the market, which suffered a crisis of confidence last year that resulted in the collapse of the former FTX industry leader.
The research also showed that nearly four-fifths of those buying cryptocurrencies used disposable income to finance purchases, 6% borrowed money, and the rest used savings or earnings from cryptocurrency sales.
The average value of their investments was estimated at just under £1,600, with 40% holding less than £100. The most common reason given for buying cryptocurrencies, as stated by 40% of respondents, was ” by bet”.
The price of popular cryptocurrency Bitcoin, which peaked at over $64,000 in November 2022, fell nearly 3% to $26,484 on Wednesday.
A new crackdown on cryptocurrency marketing follows a blitz of cases of American application this week.
The SEC filed a lawsuit against Binance on Monday, alleging that the world’s largest cryptocurrency exchange mixed billions of dollars of customer cash with a separate trading company owned by its chief executive officer Changpeng Zhao.
On Tuesday, the SEC sued rival Nasdaq-listed exchange Coinbase, claiming it violated US securities law by failing to register as a broker, national stock exchange or clearing house.
https://www.ft.com/content/0de17dc3-5f70-45c2-a933-2f914bac32d2
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